The EU’s top trade official has played down fears that rules protecting company interests could spark a wave of litigation from US multinationals, insisting there was “nothing shocking” about the plans.

EU and US trade officials will hold a sixth round of talks on what would be the largest free trade deal ever agreed, referred to as a Transatlantic Trade and Investment Partnership, in Brussels in July.

The aim of both sides is to go beyond the scrapping of remaining tariff barriers on the trade of goods and harmonise regulatory standards across a range of sectors. Achieving this would make a deal worth more than €120 billion in economic gains per year, say European Commission officials.

One key hurdle is the question of how to apply international rules governing the rights of investors to protect their interests against governments.

Speaking on Wednesday (25 June) at a event in London organised by the trade group BritishAmerican, EU trade commissioner Karel de Gucht described them as “basic principles of the law” which would benefit European firms.

The mechanism, known as investor state dispute settlement (ISDS), allows companies to take legal action against governments on the grounds of unfair treatment or discrimination in favour of domestic firms.

De Gucht stated that EU governments were signatories to 1,400 investment protection agreements, nearly half of the 3,000 such deals between governments around the world.

He added that the rules would benefit European firms, who are responsible for more than half the number of investment dispute cases world-wide.

But rights for investors has become one of the main stumbling blocks in the trade talks.

Opponents of the regime say that investor claims can prevent governments from passing legislation in fields such as environmental and social protection, and allow multinationals to claim potentially unlimited damages in "arbitration panels" if their profits are adversely affected by new regulations.

They also claim that arbitrations are carried out in secret by trade lawyers, and point to a ongoing case brought by tobacco giant Philip Morris against the Australian government over laws requiring plain packaging for cigarettes sold in the country.

The Commission froze discussions on ISDS in March, pending a three-month public consultation which closes in two weeks time, following protests by NGOs and consumer groups.

Meanwhile, both the German and French governments have stated their opposition to including ISDS in TTIP on the grounds that US investors in the EU already have sufficient legal protection in national courts.

For its part, the US says that ISDS must be part of a final agreement, which officials are hoping to wrap up in late-2015.

De Gucht maintained that TTIP would leave “very clear boundaries in order to fully protect governments’ right to regulate in the public interest”.

EU officials were also bidding to increase transparency in arbitration tribunals, he said.

"Our choice is not between a world where each does as he pleases and a nightmare where we are ruled directly by multinational corporations," he concluded.

Analysis

When political leaders on both sides of the Atlantic gave negotiators the green light to start talks on a Transatlantic trade and investment partnership (TTIP), it was widely seen as an economic 'win-win' - a debt free economic stimulus.